A central bank digital currency (CBDC) would be a “fundamental transformation” of banking and payments and poses serious risks, CUNA wrote to a House Financial Services subcommittee Thursday. The Subcommittee on Digital Assets, Financial Technology, and Inclusion conducted a hearing Thursday on the implications of a CBDC and private sector alternatives.

“At this time, the potential risks of a CBDC are not sufficiently mitigated to be outweighed by the potential benefits a CBDC could provide to consumers and the economy,” the letter reads. “It is imperative that the discussion and research continue, and that new proposals are considered and evaluated on their merits.”

CUNA adds that consideration of a CBDC must proceed with several cornerstone principles:

• Implementation of a CBDC should not proceed without congressional authorization and a clear structure and novel purpose.
• Any CBDC must utilize an intermediated model that preserves the direct relationship between consumers and financial institutions.
• Deposit substitution and its cascading effects must be sufficiently mitigated as to prevent reduction of the credit supply, to maintain affordable credit, and to ensure the safety and soundness of the financial system and overall economy.